The Future Fund has grown 8.8 per cent over the year to December with its asset base rising to $138.9 billion in the December quarter. When associated funds are included assets totalled $164 billion at December 31.
Despite its chairman, former Treasurer Peter Costello, calling for the Fund to be used to nationalise superannuation late last year, it underperformed the average balanced super fund, which returned 10.8 per cent for, calendar 2017. It is also well below the performance of industry leader, Australian Super, which returned 13.6 per cent for the year.
However, the comparison does not take into account the fact that the Future Fund pays no tax and does not have the costs of servicing a large membership base as other super funds do.
The Future Fund has averaged 8.1 per cent return over 10 years compared to 5.4 per cent for the average super fund in growth mode.
The Future Fund is taking a more bullish stance in recent times by moving to a more growth orientated investment profile. Its exposure to developed market equities moved to 18.6 per cent of the portfolio from 15 per cent a year earlier.
However, back in 2014 the equity exposure was 23.1 per cent meaning current settings are still more conservative than a few years ago.
“The Future Fund continues to perform strongly. It is delivering against its objective, which is to strengthen the Commonwealth’s long-term financial position,” said Mr Costello.
“Returns have exceeded the target benchmark across all timeframes. From seed capital of $60.5 billion the Fund has now earned $78 billion,” he said.
“The global growth outlook improved through the year supported by synchronised growth in America, Europe and Japan. Unemployment is falling but inflation is still contained and low.”
“A number of the risks we have been cautious about for some time have receded. Given the positive near-term outlook we have modestly increased the Fund’s risk levels. Despite the recent buoyancy, in the longer term the global economy continues to face structural challenges including demographic shifts and high levels of debt and we expect long- term prospective returns to be lower relative to history,” he said.
“Overall our risk profile continues to sit around the middle of our expected range, slightly above a neutral setting. Reflecting the more positive economic environment and improving market conditions we have increased our listed equity exposure, particularly in developed markets,” said CEO David Neal.
“Our portfolio construction continues to emphasise and balance two key characteristics: diversification and flexibility. Our private market and alternatives programs are performing well whilst helping to moderate market risk. Portfolio flexibility helps us to withstand, and potentially take advantage of, market dislocations as they occur,” Mr Neal said.
The Future Fund was established to cover unfunded Commonwealth superannuation liabilities and will begin paying out on these from 2026-27.